AFR to Conference Committee: Support the Pre-Funded Dissolution Fund

June 15, 2010

To Members of the H.R. 4173 Restoring American Financial Stability Act of 2010 Conference Committee

Re: Protect Taxpayers by Supporting the House-Passed Pre-Funded  Dissolution Fund

Dear Committee members,

The over 250 consumer, employee, investor, community, small business and civil rights groups who are members of Americans for Financial Reform (AFR) are writing to voice our strong support for the inclusion of the $150 billion House-passed Orderly Dissolution pre-fund in the final bill to be reported out of conference.

The House bill includes an industry assessment to pre-fill the $150 billion Orderly Dissolution Fund. We support this pre-fund, as it will allow the FDIC to have the necessary resources in hand at the moment of receivership. The fund will not be used for a bailout; it will be used to pay funeral expenses. We believe that industry and not taxpayers should front those funeral expenses.

Pre-funding protects American taxpayers by ensuring that high-risk firms – not the U.S. Treasury – pay the costs of their failure. We recognize that lobbyists for the financial sector are opposed to the idea of large, risky firms paying into a fund. But the financial crisis taught us that the excessive speculation that caused the crisis is immensely profitable to Wall Street executives in the short term; assessing firms fees based on their size and riskiness provides a powerful counter-incentive – and is only fair. We urge all members of the conference committee to stand up for the American taxpayer and support the House-passed pre-fund.

The proposed resolution process is not a bailout, and it is not insurance. It does not soften or eliminate the consequences of irresponsible behavior. Resolution is a winding down and liquidation of a failed company. Management is fired, equity is wiped-out, and creditors suffer losses. Resolution does not relieve firms from suffering the consequences of irresponsible actions; it’s the death penalty. Members wishing to avoid bailouts and protect taxpayers should support a strong, well-funded resolution authority that forces Wall Street, not Main Street, to pay the costs.

If you have questions, please do not hesitate to contact Dana Chasin of Americans for Financial Reform at

Americans for Financial Reform

Click here to download a copy of the letter (pdf).